For the Fed, the US rate hike is not over yet

The Federal Reserve (Fed) the US central bank, reduced their efforts to curb inflation and said that new interest rate hikes are expected while debating when to end the most aggressive credit tightening in four decades.

(See: Federal Reserve raised its rate by 25 basis points).

Fed policymakers raised their benchmark rate target by a quarter of a percentage point, to a range of 4.5% to 4.75%.
This increase follows a half-point rise in December and previous increases of 75 basis points.

The decision of the Federal Open Market Committee (Fomc) was unanimous and coincided with the expectations of the financial markets.

“The committee anticipates that continued increases in the target range will be appropriate to achieve a monetary policy stance that is tight enough to return inflation to 2% over time.the Fed said in a statement issued after the two-day meeting, repeating language it has used in previous post-hike communications.

In a sign that the end of the hike cycle could be in sight, the committee said that the “scope of future increases” of interest rates will depend on a number of factors, including the cumulative tightening of monetary policy.

Previously the Fed had linked the pace of future increases to these factors.

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In another change from its last statement, the Federal Reserve noted that inflation “has moderated a bit, but is still high”, which suggests that policy makers are increasingly confident that price pressures have peaked.

This compares with previous statements, in which officials limited themselves to pointing out that price growth was high.

At their previous meeting in December, 17 of the 19 policymakers predicted raising rates to 5% or higher this year, and none of them expected cuts.

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Fed Chairman Jerome Powell He anticipated that the central bank will carry out more interest rate hikes over the next few months. “While recent developments are encouraging, we will need a lot more evidence to be sure that inflation is staying on the downside.”, he pointed out, after the eighth consecutive increase in interest.

Powell anticipated that “continued increases will be appropriate” for achieve monetary policy “restrictive enough” to bring inflation down to 2%.

“We have covered a lot of ground and the full effects of our rapid tightening have not yet been felt thus far. We have more work to do”, he insisted.

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With this rise in rates The US are in a range between 4.5% and 4.75%, the highest figure since September 2007. To try to combat inflation, the Fed began rate hikes in March 2022, this time by 0.25 basis points.

BLOMMBERG AND EFE